U.S. Expels Envoy From Ecuador, President Correa Slams U.S.

The U.S. expelled Ecuador’s
ambassador to Washington today in retaliation for the expulsion
of the top U.S. diplomat in the South American country.

Within hours, Ecuador’s President Rafael Correa accused the
U.S. of infiltrating his country’s police.

Ecuador on April 5 expelled the U.S. ambassador to Quito,
Heather Hodges, in protest over allegations she made in a
classified diplomatic cable to Washington that Correa had
knowingly appointed a corrupt police chief. The cable was made
public by the anti-secrecy group WikiLeaks.

“The unjustified WikiLeaks action of the Ecuadorean
government in declaring Ambassador Hodges persona non grata left
us no other option than this reciprocal action,” State
Department spokesman Mark Toner said. The U.S. also is
suspending talks with Ecuador scheduled for June, he said.

Hodges is the third U.S. ambassador displaced by the
fallout from classified memos made public. The U.S. envoy to
Mexico resigned and the U.S. ambassador to Libya was recalled to
Washington after sensitive cables were released by WikiLeaks.

Assistant Secretary of State Arturo Valenzuela called in
Ecuadorean Ambassador Luis Gallegos this morning to tell him he
had been declared persona non grata and must leave the U.S. as
soon as possible.

‘Regrettable and Unwarranted’

“The United States is interested in a positive
relationship with Ecuador, but the regrettable and unwarranted
decision to declare Ambassador Hodges persona non grata will
have to be taken into account going forward,” Toner said.

Ecuador’s foreign minister, Ricardo Patino, said that it
was still possible to maintain “cordial relations” between the
two countries and that trade relations and consulates haven’t
been affected by the expulsions, according to a statement on the
Ecuadorean Foreign Ministry’s website.

“Both countries will maintain their trade envoys for
now,” the statement said in Spanish. “In a few weeks, we hope
we can restart dialogue with the U.S. and get past this
moment.”

Correa, meanwhile, accused the U.S. of “infiltrating” the
Andean nation’s police and security forces. The U.S. last year
gave Ecuador $6.36 million in anti-narcotics assistance for the
country’s police, armed forces and judiciary.

On April 5, the Ecuadorean embassy in Washington said in a
statement that the expulsion of Hodges was “aimed solely at the
individual involved” and “not toward the United States
government or the Obama administration.”

‘Corrupt Activities’

In Hodges’ cable, which was published in the Spanish
newspaper El Pais on April 4, she wrote that the police chief’s
“corrupt activities were so widely known within the upper ranks
of the ENP that some Embassy officials believe that President
Correa must have been aware of them when he made the
appointment,” referring to the upper ranks of the nation’s
police force. “These observers believe that Correa may have
wanted to have an ENP Chief whom he could easily manipulate.”

Correa said the cable revealed that the U.S. “has the
police and armed forces infiltrated.”

“This woman received information and sent it to her
government. This isn’t loyalty, it’s bad faith,” he said in a
statement.

Correa, a political ally of Venezuela’s President Hugo Chavez, has repeatedly clashed with the U.S. since 2008, when he
refused to renew a 10-year lease on a U.S. air base used to
conduct anti-drug surveillance in the Andes, the world’s biggest
cocaine-producing region. In February 2009, Correa expelled two
U.S. embassy employees during a conflict over personnel
selection in a U.S.-funded police program.

$13 Billion in Trade

Trade with the U.S., Ecuador’s biggest commercial partner,
is unlikely to be affected by the dispute, Patrick Esteruelas,
an analyst at Moody’s Investors Service in New York, said in a
telephone interview today.

Total trade between the two nations last year was $13
billion, most of that in oil, according to U.S. Census data.
Ecuador’s government earns 24 percent of its revenue from oil.

“It’s too early to say that this could result in a
sustained freezing of diplomatic relations, let alone a
commercial crisis that could have an impact on Ecuador’s
economy,” Esteruelas said. “The U.S. hasn’t retaliated
commercially against Ecuador in the past.”

The yield on Ecuador’s 9.375 percent bonds maturing in 2015
fell 10 basis points to 9.82 percent at 3:55 p.m. New York time,
according to JPMorgan Chase & Co. (JPM) The bond’s price rose 0.35
cents to 98.35 cents on the dollar.

The extra yield investors demand to hold Ecuadorean dollar
bonds instead of U.S. Treasuries narrowed 6 basis points, or
0.06 percentage point, to 7.25 percent, according to JPMorgan’s
EMBI+ index. Ecuadorean government debt is the second-riskiest
after Venezuela’s among 15 emerging markets tracked by JPMorgan.